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Inside Washington (02/08/2011)

* WASHINGTON (2/9/11)--Credit Union National Association (CUNA) Chief Economist Bill Hampel shared CUNA’s assessment of credit unions’ 2010 performance at a meeting of Washington, D.C. metro-area credit unions Monday night. Hampel predicted that--that after two years of “abysmal” earnings during the depths of the country’s recession--final year-end numbers will show that credit unions finished 2010 with return on assets (ROA) of about 45 to 50 basis points. That positive ROA is after the impact of National Credit Union Share Insurance Fund (NCUSIF) premiums and corporate stabilization assessments is factored in. Although that level of earnings is still below the 1% average ROA more typically experienced by credit unions, it is “at least a step in the right direction” coming out the previous two years, when credit union ROA averaged closer to 0 (7 bp), Hampel underscored. He said he expects ROA in 2011 to run at about 70 to 75 bp, not counting the impact of premiums and assessments. He also expects credit unions will be helped by improvement in allowance for loan losses, a somewhat steeper yield curve, and a pickup in loan demand (which declined last year for the first time since the early 1980s). A drag against earnings in the year ahead will be the potential effects of coming rules on debit interchange, and continued National Credit Union Administration assessments. Hampel expects premiums of 5 to 10 bp this year for NCUSIF and about 9 bp in assessments for the cost of corporate stabilization. Hampel was on a panel with National Association of Federal Credit Unions Chief Economist Tun Wei, moderated by Credit Union Times Editor Sarah Snell Cooke … * WASHINGTON (2/9/11)--Fannie Mae and Freddie Mac's mortgage portfolios have “significant unrealized gains” that should be sold off to protect taxpayers, the new chairman of the House Financial Services subcommittee on capital markets and government-sponsored enterprises (GSE) said on Monday. Rep. Scott Garrett (R-N.J.), speaking at an American Securitization Forum conference, said that under the current conservatorship agreement, the $1.5 trillion mortgage portfolios of the GSEs are set to decrease by a small percentage each year until they reach a certain set level. Garrett advocates speeding up this process by selling off some of the assets to minimize interest-rate risk and achieve unrealized gains. “Some of the assets can be sold off more quickly; others cannot because they are less liquid,” he said. “The GSEs own different assets and there are specific markets for each of these assets. We need to more closely look at each of the portfolio components and figure out how to wind them down sooner to protect taxpayers” … * WASHINGTON (2/9/11)--The Federal Housing Finance Agency has proposed a rule to limit Fannie Mae, Freddie Mac, and the Federal Home Loan Banks from dealing in mortgages on properties encumbered by certain types of private transfer fee covenants and in some related securities. The proposed rule would exclude private transfer fees paid to homeowner associations, condominiums, cooperatives, and certain tax-exempt organizations that use private transfer fee proceeds to benefit the property. Fees that do not directly benefit the property would be barred. With limited exceptions, the rule would apply only prospectively to private transfer fee covenants created on or after the date of publication of the proposed rule. Written comments must be received on or before April 11. The proposal can be viewed online.